How the metaverse will make money

Three trillion U.S. dollars: That’s the metaverse’s estimated contribution to the global economy in 2031, if its adoption began today and its growth matched that of smartphone-related industries after their first decade, according to a recent study by the research firm Analysis Group, commissioned by Meta Platforms (META, US$195.65), parent company of Facebook. The metaverse, this technological vision of the future where consumers will one day be able to buy, have fun, study and work in 3D virtual worlds, thanks in particular to virtual reality, could also contribute to 0.9% of Canadian GDP after 10 years, according to the same analysis.

This explains why a company like Meta, to name just one, spent more than US$10 billion in 2021 alone developing the technologies needed to make it happen.

Here are five ways the metaverse could go from red to black within a few years.

1. Purchases of virtual goods

A fashionable hat to put on the head of his 3D avatar, an armchair to furnish his virtual house, a colorful weapon to use in shooting games: the digital objects acquired by users of the metaverse may be composed of pixels , but the money spent to buy them will be very real.

“It’s something that already exists in video games,” notes Maude Bonenfant, professor in the Department of Social and Public Communication at the University of Quebec in Montreal and holder of the Canada Research Chair in Big Data and gaming communities.

For each digital object purchased, the owners of the metaverse platforms (or metaverses, as some say to better reflect the fact that several of these universes are likely to be launched, and that they will not necessarily be interrelated) will keep part of the income.

Meta last April gave a glimpse of what this monetization could look like, opening the door to the sale of digital items in its Horizon Worlds software, a kind of precursor to the metaverse, accessible for now through the Meta Quest 2 virtual reality headset only, but will eventually launch on other platforms, such as the web.

Currently, 30% of revenue from items sold on Horizon Worlds is retained by the hardware platform, Meta’s Quest Store. “Over time, as we extend Horizon Worlds to other platforms (Editor’s note: the web or game consoles, for example), other companies will charge their own platform fees and this part will not will not necessarily be donated to Meta”, specifies a spokesperson for the company to Deals. After hardware platform fees are retained, 25% of the remaining revenue is retained by Horizon Worlds (17.5% of the original sale amount currently, after retaining the 30% from Quest Store, or 47.5% in total) .

In short, both the hardware manufacturers and the companies that will create the software architecture of the metaverse or the developers that will sell digital objects will be able to profit from these sales. In some cases, all of these stakeholders will be a single company.

2. Metaverse Advertising

All the experts interviewed by Deals agree on one thing: advertising will be present in the metaverse.

“If I can access Facebook for free, it’s because I give them data and they display advertising.

In the metaverse, it will be the same,” said Ben Skinazi, chief marketing officer at Sharethrough, one of the world’s largest independent ad exchange technology companies.

Since the beginning of 2022, around twenty company employees have been meeting periodically in virtual reality to plan the arrival of advertising in this area.

“It opens up several opportunities for advertisers,” said Ben Skinazi, such as the creation of 3D advertising objects with which users can interact, but also data on their attention. By analyzing the gaze of users, it will be possible to know how long an advertisement has been looked at with attention, for example.

“It will help measure engagement and attention, which is very interesting for advertisers,” explains Ben Skinazi. Developers will be able to make an effort to place their advertisements well in order to make them more efficient.

3. Sale of equipment

The metaverse is associated with virtual reality, but other technologies should be able to provide access to it, such as augmented reality, computers and video game consoles.

Selling these devices is another way for manufacturers to profit from the metaverse, but it’s not the only one.

Connecting millions of people simultaneously in a 3D universe requires significant computing resources, especially if the rendering of these worlds is done in servers, and not on users’ devices (which will probably be the case, for the glasses virtual reality are as small as possible, for example).

It is for this reason in particular that manufacturers of graphics cards, such as Nvidia (NVDA, US$189.20), are also interested in the metaverse.

4. Subscription revenue

You probably won’t need a paid subscription to access the metaverse. “We don’t expect there will be any barriers to entry,” said Martine Lapointe, general manager of the Montreal office of consulting firm Accenture. Certain parts of these virtual universes could however be accessible by subscription, as is currently the case on the Web with media and video broadcasting services.

These subscriptions could also be optional, a concept widespread in video games, such as Fortnite (a title by the way designed by Epic Games, a company that invests a lot in the metaverse). A subscription could for example allow to obtain more digital objects, or even a larger virtual house.

However, these subscriptions will not limit the virtual movements of users. “We’re going to be able to jump from one metaverse to another without realizing it. There has to be a certain fluidity,” says Martine Lapointe.

5. Virtual rarity

Some technology companies associate the metaverse with blockchains and non-fungible tokens (better known by the acronym NFT) in order to confer scarcity on digital objects.

A pair of shoes for his avatar could then only exist in ten copies, for example, which would increase their initial value and their resale value (and the platforms could keep a part of each transaction, primary and secondary).

Scarcity can even be associated with virtual real estate. Some precursors to the metaverse, such as Decentraland, thus limit the surface area of ​​their virtual world in order to increase the selling price of “lands”. Last year, a company also bought for 2.4 million US dollars of digital land in this universe built around a chain of blocks.

There is no indication that virtual real estate will become a source of income for big tech players, like Meta or Epic Games, but NFT-authenticated art could easily find a place in their virtual universes.

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How the metaverse will make money

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